Editorial: Accounting for economic priorities

Once again, the Directorate-General of Budget, Accounting and Statistics (DGBAS) has revised its economic growth forecast for this year and next year. The good news is that the statistics agency has this time adjusted its GDP growth forecasts upward for the first time in about 14 months. The bad news is that domestic recovery is not particularly strong, and the employment outlook and private consumption remain weak.

On Friday, the DGBAS said it now expected the economy to expand 1.13 percent for the whole of this year, which was higher than the 1.05 percent growth it forecast on Oct. 31. Prior to the latest update, the agency had lowered its growth forecast nine consecutive times since August last year, when it estimated the economy would expand 4.58 percent this year.

The government’s latest statistics confirmed that economic activity bottomed out in the September quarter, growing 0.98 percent year-on-year, while GDP is expected to show an annual increase of 2.97 percent this quarter. For next year, the DGBAS also raised its economic growth forecast to 3.15 percent from the 3.09 percent estimate it made late last month.

If achievable, the new GDP growth forecasts are certainly good news, but this is just one way to read the government’s latest data.

Export order data released by the Ministry of Economic Affairs (MOEA) on Tuesday showed that demand over the next one to three months increased for two consecutive months last month, rising 3.2 percent year-on-year to US$38.38 billion, the second-highest level on record. While this supports the DGBAS’ view that the nation’s economic momentum will pick up this quarter, the question is whether the economy can sustain growth solely on recovering external demand.

This is especially true because the public often ignores government data about GDP and exports, focusing instead on job security and disposable income. People are unlikely to go on a shopping spree based on an upward revision in GDP outlook.

Public confidence in the nation’s economic outlook might also be stronger if not for other data that suggest signs of weakness in other parts of the economy.

In the face of high unemployment and stagnant salaries, private consumption may only edge up 0.14 percent this quarter, the lowest rate since the second quarter of 2009, and may increase only 1.13 percent for the whole of this year, before hitting 1.45 percent growth next year, based on government forecasts.

Consequently, local companies are expected to face a difficult time in capturing consumers’ dollars.

Additionally, the latest domestic trade data, released by the MOEA on Friday, showed the combined revenue of the retail, wholesale and restaurant sectors declined last month for the fifth month in a row to NT$1.22 trillion (US$41 billion), and, most importantly, the MOEA said it did not expect the situation to show a significant improvement this quarter, nor during next year.

The less-optimistic prospects in private consumption and domestic trade reflect the fact that consumers are still downbeat about the labor market. Indeed, the latest unemployment figure, released on Thursday, caught many people by surprise, because not only did the rate rise for a second consecutive month to 4.33 percent last month, but it also marked the fourth time in 10 years that October’s rate was higher than September’s.